Fundsters interested in retirement income may want to take a look at Vanguard's [ see profile ] latest approach. The mutual fund giant has introduced a new web-based service that enables individuals to compare income annuities from different insurance companies. Vanguard Annuity Access is currently offered on Hueler Companies’ Income Solutions platform.
Financial Planning's Matt Ackerman and the Retirement Income Journal both covered the news.
Tim Buckley, managing director of Vanguard’s Retail Investor Group, said traditionally, annuities have been viewed as complex products that were sold and not bought. "Vanguard Annuity Access brings the tools and transparency to the annuity-buying process, enabling self-directed individuals interested in a ‘paycheck for life’ option to make an informed decision," Buckley stated.
Buckley added that the new annuity service complements Vanguard’s market-based options for retirees, which include systematic withdrawals from a diversified portfolio of low-cost Vanguard mutual funds, Vanguard Managed Payout Funds, and retirement income plans developed by a certified financial planner professional.
“The new Vanguard Annuity Access service is a powerful collaboration that brings together Hueler’s proven low-cost annuity platform with Vanguard’s trusted name,” said Kelli Hueler, CEO of Hueler Companies. “Now prospective annuity purchasers -- both retirement-ready plan participants completing a rollover and transitioning individual investors -- will benefit from an easy-to-use online resource supported by Vanguard’s licensed, non-commissioned annuity specialists.”
Company Press Release
VALLEY FORGE, PA, September 8, 2010—Vanguard has introduced a new web-based service that enables individuals to compare income annuities from leading insurance companies. Income annuities are insurance contracts purchased with a single lump sum that offer immediate income payments (usually monthly) for a specified period or for the annuitant’s lifetime.
Vanguard Annuity Access™, powered by Hueler Companies’ Income Solutions® platform, is designed for individuals seeking a guaranteed* stream of income in retirement to augment their investment holdings, workplace retirement plan, and Social Security benefits. The service can be particularly attractive to retirement plan participants rolling their assets over to a Vanguard IRA® (individual retirement account) as they retire. Prospective purchasers can obtain customized quotes on a real-time basis and evaluate competitively priced, directly comparable contracts from multiple companies.
“Traditionally, annuities have been viewed as complex products that were sold and not bought. Vanguard Annuity Access brings the tools and transparency to the annuity-buying process, enabling self-directed individuals interested in a ‘paycheck for life’ option to make an informed decision," said Tim Buckley, managing director of Vanguard’s Retail Investor Group.
Mr. Buckley added that the new annuity service complements Vanguard’s market-based options for retirees, which include systematic withdrawals from a diversified portfolio of low-cost Vanguard mutual funds, Vanguard Managed Payout Funds, and retirement income plans developed by a Certified Financial Planner™ (CFP) professional.
Hueler Companies has been a leading provider of web-based annuity purchase systems since 2004. The firm now provides participants in more than 1,000 defined contribution plans access to income annuities as a tax-deferred rollover option for their retirement assets.
“The new Vanguard Annuity Access service is a powerful collaboration that brings together Hueler’s proven low-cost annuity platform with Vanguard’s trusted name,” said Kelli Hueler, CEO of Hueler Companies. “Now prospective annuity purchasers—both retirement-ready plan participants completing a rollover and transitioning individual investors—will benefit from an easy-to-use online resource supported by Vanguard’s licensed, non-commissioned annuity specialists.”
Income Annuities for DC Plan Participants Entering Retirement
Defined contribution plan sponsors are paying increased attention to retirement income strategies, with the goal of providing their participants with the education and tools they need to translate their lump-sum benefits into sustainable income. Since many sponsors are concerned that “in-plan” options such as income annuities will lead to added fiduciary responsibility and increased plan complexity, Vanguard Annuity Access will be offered to participants as an IRA rollover option.
“More than 80% of retiring participants in Vanguard-administered DC plans leave their employer’s plan within three years, typically for an IRA rollover account. As a result, our plan-sponsor clients are interested in an “outside-the-plan” guaranteed income program,” said Barbara Fallon-Walsh, head of Vanguard Institutional Retirement Plan Services. “Many plan sponsors offer the Vanguard Financial Plan service for their participants aged 55 and older, which provides them with free access to a CFP who can help them with retirement income planning. Vanguard Annuity Access represents an additional service they can offer participants entering retirement.”
Vanguard provides recordkeeping and investment services to 3.5 million participants and 1,700 plan sponsors in more than 2,500 defined contribution plans.
Plain Talk about the Risks of Income Annuities
John Ameriks, head of Vanguard Investment Counseling & Research co-author of Vanguard retirement income research (including Generating Guaranteed Income: Understanding Income Annuities) encourages retirees to weigh the pros of guaranteed income versus the cons, which include loss of investment liquidity, the potential reduction in bequeathable wealth, and the risk of default of the underlying insurer.
Costs are another important consideration. The investment management, distribution, administrative and other costs associated with fixed annuity products are reflected in annuity quotes. As a result, the “apples-to-apples” comparability of quotes at the time they are obtained is critical in evaluating whether contracts are competitive among their peers.
Vanguard Annuity Access is designed to provide competitive payments to investors, resulting from the meaningful competition among insurance companies on the Income Solutions platform and from the institutional, or group-rate, pricing of the annuities offered. The quotes should also be competitive because of the low transaction fee of 2%** of the annuity purchase amount.
“For retirees who place a high value on having an additional lifetime income guarantee beyond Social Security and a pension—and are willing to accept the costs and risks of annuitization—low-cost income annuities can be an important part of a broader investment plan,” said Mr. Ameriks.
Fixed Deferred Annuities Also Available
The Vanguard Annuity Access service will also offer access to fixed deferred annuities with fixed interest durations ranging from three to seven years. These savings vehicles are designed for tax-sensitive investors wishing to supplement other forms of retirement savings, such as 401(k) plans and IRAs. A fixed deferred annuity lets clients earn a fixed interest rate on their savings for a set number of years. Both the interest rate and principal are guaranteed by the insurance company that issues the annuity.
About Hueler Companies, Inc.
Hueler Companies, Inc. and its affiliates (together, the Hueler Companies), located in Minneapolis, Minnesota, was founded in 1987 as a stable value consulting and data research firm. Today, Hueler Companies is a leading technology and research firm offering key resources for the analysis, research and implementation of stable value and annuity products. In 2004, Hueler Investment Services, Inc. launched Income Solutions®, a web-based immediate income annuity purchase system designed as an IRA rollover option and for transitioning investors to purchase institutionally priced annuities with their retirement savings.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages nearly $1.4 trillion in U.S. mutual fund assets. Vanguard offers more than 160 index and actively managed funds to U.S. investors and more than 50 additional funds in non-U.S. markets. Vanguard provides recordkeeping and investment services to 3.5 million participants and 1,700 plan sponsors in over 2,500 defined contribution plans, and is also a major provider of investment, advisory, and recordkeeping services to defined benefit plans.
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Vanguard annuity specialists are licensed through Vanguard Marketing Corporation.
* Guarantees are subject to the claims-paying ability of the issuing insurance company.
** The annuity quotes provided are net of the 2% fee. The dollar amount invested is the amount that is being placed in the contract. Any additional costs the issuer bears are factored into the pricing of the product.
All asset figures are as of August 31, 2010, unless otherwise noted.
All investments are subject to risk.
The Managed Payout Funds are not guaranteed to achieve their investment objectives, are subject to loss, and some of their distributions may be treated in part as a return of capital. The dollar amount of a fund’s monthly cash distributions could go up or down substantially from one year to the next and over time. It is also possible for a fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under its managed distribution policy. An investment in a fund could lose money over short, intermediate, or even long periods of time because each fund allocates its assets worldwide across different asset classes and investments with specific risk and return characteristics. Diversification does not necessarily ensure a profit or protect against a loss in a declining market. The funds are proportionately subject to the risks associated with their underlying funds, which may invest in stocks (including stocks issued by REITs), bonds, cash, inflation-linked investments, commodity-linked investments, long/short market neutral investments, and leveraged absolute return investments.
Vanguard Annuity Access is provided by Vanguard Marketing Corporation and is offered in collaboration with Hueler Investment Services, Inc. through the Income Solutions platform. Income Solutions is a registered trademark of Hueler Investment Services, Inc. and used under license. United States Patent No. 7,653,560. Products may not be available in all states.
For more information about Vanguard funds, visit www.vanguard.com, or call 800-662-7447, to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
Vanguard Marketing Corporation, Distributor of the Vanguard Funds.